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Nbfc Nbfc Presentation Transcript

  • NBFC
  • A Non Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 of India, engaged in the business of loans and advances, acquisition of shares, stock, bond sire-purchase, insurance business, or chit business.  A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company 
  • (i) a NBFC cannot accept demand deposits (demand deposits are funds deposited at a depository institution that are payable on demand -- immediately or within a very short period -- like your current or savings accounts.)  (ii) it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and  (iii) deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.  View slide
  • In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be registered with RBI to commence or carry on any business of non-banking financial institution as defined in clause (a) of Section 45 I of the RBI Act, 1934  However, to prevent dual regulation, certain category of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. venture capital fund/merchant banking companies/stock broking companies registered with Sebi, insurance company holding a valid certificate of registration issued by IRDA,  View slide
  • NBFCS REGISTERED WITH RBI HAVE BEEN CLASSIFIED AS i) Asset Finance Company (AFC) - AFC would be defined as any company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive / economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines.  ii) Investment Company (IC)  (iii) Loan Company (LC) 
  • SOME IMPORTANT POINTS i) The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand. ii) NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. iii) NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors. iv) The deposits with NBFCs are not insured. v) The repayment of deposits by NBFCs is not guaranteed by RBI. vi) There are certain mandatory disclosures about the company in the Application Form issued by the company soliciting deposits. vii) There is no Ombudsman for hearing complaints against NBFCs
  • REQUIREMENTS FOR REGISTRATION WITH RBI   A company incorporated under the Companies Act, 1956 and desirous of commencing business of nonbanking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should have a minimum net owned fund of Rs 25 lakh (raised to Rs 2 crore from April 21, 1999). The company is required to submit its application for registration in the prescribed format alongwith necessary documents for bank's consideration. The bank issues certificate of registration after satisfying itself that the conditions as enumerated in Section 45IA of the RBI Act, 1934 are satisfied
  • EVOLUTION, PROGRESS AND GROWTH Around 2941 NBFC in 1971 but could not make any perceptible impact on financial system because of their limited scope of activities  25085 NBFC towards end of 80s  As on June 2000, RBI approved 9130 companies for registration  Demand for consumer durables was met by liberal lending by NBFC’s, fuelling the growth of NBFC’s  Once SEBI came into existence, NBFC’s got into merchant banking 